Kotak Mahindra Bank FD Premature Withdrawal

What is Kotak Mahindra Bank FD Premature Withdrawal?

Kotak Mahindra Bank FD premature withdrawal means closing your fixed deposit before its original maturity date. The bank permits this in case of urgent financial needs, but certain conditions apply. If the FD is closed within 7 days of booking, no interest is paid, and only the principal amount is returned. In all other cases, Kotak Mahindra Bank FD rates are recalculated based on the actual tenure the deposit was held. A penalty may also apply depending on how long the funds remained invested.

How to Close Kotak Mahindra Bank FD Prematurely?

Kotak Mahindra Bank allows you to close your Fixed Deposit before maturity through both online and offline channels. Here’s a step-by-step guide for both methods:

1. Online Method

   To close your Fixed Deposit instantly using Kotak Net Banking:

   • Log In: Visit the official Kotak Mahindra Bank Net Banking portal and log in using your customer credentials.
   • Access the Investment Section: From the main menu, navigate to the Investment section and select Deposit.
   • Initiate Premature Withdrawal: Choose the option labelled Premature Withdrawal of Deposit.
   • Review and Submit: Confirm the deposit details and submit the request. The FD amount will be credited to your linked Kotak Mahindra Bank savings account instantly.

2. Offline Method 

   If you prefer to complete the process in person:

   • Visit the Nearest Branch: Go to your nearest Kotak Mahindra Bank branch during working hours.
   • Request Premature Closure: Ask the service desk for a Fixed Deposit Premature Withdrawal form.
   • Provide Required Documents: Complete the form and submit it along with the FD receipt and a valid identity proof.
   • Processing and Credit: After processing, the FD amount will be credited to your bank account within 24 to 48 hours.

Disadvantages of Kotak Mahindra Bank FD Premature Withdrawal

Kotak Mahindra Bank allows customers to withdraw Fixed Deposits before maturity, but doing so involves certain drawbacks. Here are the key disadvantages to consider:

1. Reduced Returns: 

   The bank reduces your interest rate based on how long the FD has been held. Here’s the applicable penalty:

   Tenure of Fixed Deposit	Penalty
   Up to 180 days	Nil
   181 to 364 days	0.50%
   365 days and above	1.00%

   The penalty is subtracted from the applicable FD interest rate. You can estimate your loss using this FD Premature Withdrawal Penalty Calculator.

   1. Restriction on Credit Card Against FD: 

      If your Kotak Mahindra Bank FD is linked to a credit card, you cannot close it prematurely without clearing all outstanding dues. The FD remains locked as collateral, and a No Objection Certificate (NOC) may be required to process the closure.

   2. Loss of Compounding Benefits: 

      Closing a long-term FD before maturity with Kotak Mahindra Bank stops the compounding process, leading to lower total earnings.

   3. Impact on Financial Planning: 

      Premature withdrawal of a Kotak Mahindra Bank FD can disrupt your financial plans. It may affect your savings goals, reduce expected returns, and lead to a shortfall in funds for future expenses or investments.

   4. Loan Impact: 

      Premature withdrawal of a Kotak Mahindra Bank FD may affect any loan linked to the deposit. Since FDs are often used as collateral, closing the FD early can lead to changes in loan terms or even cancellation of the loan facility.

Tax Implications on Kotak Mahindra Bank FD Premature Withdrawal

When you withdraw your Kotak Mahindra Bank Fixed Deposit before maturity, the interest is recalculated based on the actual tenure and is fully taxable under “Income from Other Sources” as per your income slab. As per Section 194A of the Income Tax Act, Tax Deducted at Source (TDS) at 10% is applicable if the total interest earned in a financial year exceeds ₹50,000 for regular individuals and ₹1,00,000 for senior citizens. If you fail to provide your PAN, TDS is deducted at a higher rate of 20%. 

How to Avoid Kotak Mahindra Bank FD Premature Withdrawal?

Here are some smart strategies to help you avoid premature withdrawal of your Kotak Mahindra Bank FD:

• Plan Your Tenure Wisely: Choose an FD tenure in Kotak Mahindra Bank that aligns with your financial goals and expected cash flow needs. Avoid locking in funds for an extended period if you may require liquidity in the near future. Use the Kotak Bank FD interest calculator to estimate returns and select the most suitable tenure.
• Opt for Sweep-out Facility: Make use of the Kotak Mahindra Bank sweep-out facility, which allows automatic withdrawal of funds from your FD to meet short-term needs. This helps maintain liquidity without needing a full premature withdrawal.
• Loan & Overdraft Facility: Instead of premature withdrawal, avail yourself of an overdraft or loan against your Kotak Mahindra Bank FD. You can access up to 90% of the deposit amount without closing the FD, ensuring continued interest earnings.
• Maintain an Emergency Fund: Keep a separate emergency fund in a savings or liquid account to handle unexpected expenses. This ensures you don’t have to opt for premature withdrawal of your Kotak Mahindra Bank FD during financial emergencies.
• Credit Card Against FD: Instead of opting for premature withdrawal, apply for a Kotak Mahindra Bank credit card against FD. It allows you to access funds without withdrawing your deposit, helping you avoid penalties while your FD continues to earn interest.

Key Takeaways

You can close your Kotak Mahindra Bank FD before maturity through both online and offline methods. In urgent situations, this can be done using Net Banking or by visiting the nearest branch. However, premature withdrawal may lead to reduced returns due to penalties and lower applicable FD interest rates. To avoid this, plan your FD tenure carefully, maintain an emergency fund, or use facilities like overdraft or sweep-out.